Reg, the big bad thing is Kevin spent money like water, over $400 million for a new mill at Endako - and the return on that was negative. And if you go back and look at older CC's he was lying through his teeth. No one (except maybe Russ at TGB!) is that incompetent, he was playing investors.
That's 400 mill they could have used to get MM up to speed without giving away half the gold.
Too bad they can't move that mill and figure out a way to make it work as a crusher for MM......
Sentiment: Strong Buy
tm, saw this short article today.
China's position as world's number one gold consumer above India appears to have been shortlived with latest customs data showing gold shipments to China from Hong Kong fell 32% in 2014 compared to a blockbuster 2013.
Net imports by mainland China amounted to 750 tonnes last year, down from 1,109 tonnes in 2013, according to data compiled by Bloomberg from the Hong Kong Census and Statistics Department. Imports in December fell 36% from the same month a year earlier.
While a retreat had been expected given the fact that imports doubled in 2013, most forecasters thought the lacklustre gold price would entice Chinese bargain hunters.
"Demand for luxury goods including bullion has been hurt by an anti-graft drive in China, while a rally in stock markets damped interest in the metal as an investment," Bloomberg offers as possible explanation for the drop in demand.
Your giving them too much credit.
They are in the bottom of Chuqui now, and can mine it for 1-2 yrs. at the rate their currently extracting, before that reaches the limits of pit shell. Remember the plan was to be at the pit base in 2014, and that was last year.
The widening of it, the alternative of stripping more phases is the only real option that delivers a steady stream of material to the Chuqui mill. That's expensive and yields little until they cut down deep into the existing pit. [The surface diameter is already well beyond the diameter of the economic porphryr now.]. They will, however, be forced to do it since the U/G transition will take four to five yrs. to construct, and another 5+ yrs. to ramp up to full mill output. So after 2026, it will be rocking. Until then, it's magic tricks on a rapidly declining output base, and their exhausting their options fast. The conveyor from R/T (a project called R/T Sulfides I) was constructed several years back but the conveyor is at capacity. That project took 3 yrs. to build. About $1 billion. I have not hear if they are building another 7km conveyor. Maybe that's coming.
If the grade at R/T goes down 30-40%, so does the output. They can naturally prevent a decline to zero at R/T oxides using lower grade ore but the output (using lower grade ore) has only one direction to go. Down.
As for leaching sulfide ore, using peroxide....? Leach time required to oxide requires lots of new tanks. They are not building that. Maybe they can rig something up. Output suffers.
R/T oxides best days are way behind it.
El Teniente is a mess too. Picking around the edge of the sub. crater won't spare them from output declines.
I don't believe Codelco. I understand they might on occasion use scare tactics to get the politicians off their butts, but the last guy who tried to create a sense of urgency, got asked to leave.
Pizzarro is just the gov't patsy whose there to give the 'happy' talk of Bachelet.
Sentiment: Strong Buy
I guess we'll see what happens. The Olavarria paper stated that the open pit at Chuqui would shut down at the end of 2014 and it looks like it hasn't happened yet.
Depletion of world class assets like that take forever. In 2005, I think they started talking about the imminent closure of Brunswick.... well that finally happened in 2012. Same goes with Century. We started hearing about it in 2008 and in 2014 they still produced ~500,000 t of Zn. And it looks like they are closing but MMG announced that they're looking at "other options" for 2015. The thing is that the reserve on these things are calculated at much lower price and the higher metal prices allows for production from low grade ore.
I suspect that this is what happening with Codelco. They are going to try to delay major constructions as much as possible but playing tricks like trucking/conveying or from RT to Chuqui or leaching sulfides at RT and so on. Also, since they are a public company, I suspect management need to paint a desperate picture publically so they get funds allocated from the government. You wouldn't see that kind of things in a normal company. And to be fair, it looks like construction has started for Chuqui UG.
But yeah, I suspect Codelco will run at about 1700 kT output (plus Los Bronces and El Abra) until they see an opportunity to expand beyond that. If their output drops, it might be 100 kT at most.
If anyone who is curious to what the future of copper output in Chile holds..........
goggle: Codelco Update June 2011.
Evolution and Projection of Codelco’s Production:
The Priority of Structural Projects
Most of the 'structural projects' on Codelco's drawing board.............HAVEN'T EVEN STARTED CONSTRUCTION YET, let along be to deemed "behind schedule".
Honestly, I don't make this stuff up.........
Codelco better figure out how to krap copper (fast) because it's +80% of revenue, and it's now January 30, 2015...........
And I bet you $5 that China's SRB knows this, and then some about Codelco.............
Sentiment: Strong Buy
Google the following:
chuquicama underground pit transition
The author was subsequently forced out of Codelco role (and ultimately his job) for his candid views expressed in the Chuqui U/G paper he wrote for a mining symposium in South Africa about a decade ago. [Olavarria works at Cochilco now per his LinkedIn page, so don't worry, his kids are still eating well I'm sure]...
The study lays out the time tables for the U/G transition. Adjust for dates.
You will see the mess that lies in front of Chuqui and soon.
Judging by the overall flattish output of Cobre Norte (irrespective the 2014 boost to it from MHM), my spying on them, and the information from their former project head for the U/G project, I know their facing a drop in production from this source, and a big one.
More magic tricks (more stripping phases beyond planned Phase 52) only prevents the operation from going to essentially zero, but doesn't stop the sharp drop in copper output the operation will experience from 2016-2020. It will be even worse for moly since less hot feed from the bottom will be sent to mill. Instead, what gets milled will be of much lower grade on all fronts.
My guess is Chuqui drops 200k MT by 2017-2018, and loses 80% of their moly output, since MHM ore has none and the 15% of the sulfide ore the Chuqui mill gets from R/T is 40% the moly grade.
It will be the "David Copperfield Trick of All Time" if they can keep the production profile up in 2016-2020 at Codelco's wholly owned mines.
And given a bunch of socialist are running the show, I'm betting they screw the pooch...........and screw it hard. After all, they've been doing for the last decade with the operation, and now their backs are to the wall.
Codelco gets clubbed, and nothing can stop it.
Sentiment: Strong Buy
And the Romans never thought the Visagoths would sack Rome either......
Codelco is out-of-time, and soon out-of-ore.
They'd have to initiate successive stripping campaigns at Chuqui to keep it rolling (beyond Phase 52), and with the current pit dimension visa vie the mineralized porphyry diameter, that digs nothing but worthless waste until they get 2/3rd's the way down. Codelco not being able to keep sufficient internally generated funds from the clutches of Chile's politicians hands and their social spending plans, as but the Chuqui operation in a serious bind. Since they can't go verticle on the pit slope without killing people, they can only go so far down, maintaining a safe operation. Stripping more new phases is the only thing that keeps Chuqui alive, but the returns diminish at ever-increasing rates. Low diesel prices might alleviate some of the pain with that, but one can only walk on water for so long......
Out of ore soon w. Level Six (2016), and Rajo Sur and related knockoff digs around the subsidence crater (which are planned) won't keep the output level at El Teniente until Level Seven is ready (probably 2020-recently they fessed up to cost overruns and delays).
Radomiro Tomic Oxide:
Ore is fast running out, decent oxide ore grades lean. The grade of what krap they will be forced to run will be much lower than ROM / present. In 2011, they planned to shutter R/T Oxide in 2016. The next phase, R/T Sulfides II (the planned concentrator) is stuck in permitting, even though Codelco is ordering equipment anyway. It won't be ready until 2018 (Codelco's latest speil from April 2014), but that's optimistic, since they haven't started building it yet, no has Chile's Environmental Ministry granted permits for it. R/T's oxide operation will be kept alive with junk ore, at much lower grades.
R/T Sulfides I (conveyor to Chuqui) is at max capacity.
Anyway you slice it, reality bites Codelo in their fat butts soon.
Sentiment: Strong Buy
Agreed. I hadn't seen the Cochilco numbers.
For 2016-2020; I suspect they will maintain a similar level of output and the Chilean government will allocate funds for them to maintain that level.
I don't see how their output could be allowed to fall off a cliff. There's too much at stake in Chile for that.
Nice run today on Gold. When you have to now pay a bank to hold your money, gold looks even more attractive, especially in Euros.
They should indeed be able to save money on energy in the current environment. That much is real, but it's not like they get a star for meritorious effort. That was just handed to them.
My work-in-process math is 1,160k MT new (but I have more to go w. it) before identified disruptions of 570k MT (which is probably 100k MT high, in reality). About 600k MT net.
My additions are similar to yours listed above.
There is no wall of copper coming.
I don't expect 2015 demand to collapse to 1% apparent usage growth as ICSG forecasts. It's 11% thru Oct 2014, and the only economies that are truly on the rocks are Greece and Ukraine/Russia. Not the biggest users of the stuff. EU28 copper consumption is up sharply in 2014 from 2013. Japan up strong. China up strong. Asia ex-China up strong. US flat - we don't make stuff here anymore (outlawed). A collapse of 2015 world copper usage to 1% is laughable, and means the world economy is in collapse. I don't foresee that happening in 2015. Do you?
All this unfolding reality on shortfalls regarding expected supply will shake up the market (and prognosticators) soon enough, but most of the analysts already know this..........and now their just working on their 'cover stories' right now. But the 'wall of supply' thesis pressing down copper is more engineered myth than reality, IMO. Ultimately, supply and demand will drive copper, not myths and fairy tales.
Sentiment: Strong Buy
Indeed, and a goodly percentage of that scrap source (old scrap) is finite.
New scrap from industry will be available but the overall market is 60/40 new/old. And I already took all the copper wiring out of my neighbors house while he was away on Xmas holiday, it's not like I can do it again.....right?
China getting real fussy about what scrap the world is sending them. Too dirty.
Solution: their smelters will buy more cathode.
Sentiment: Strong Buy
Lots of press releases and Reuters articles today, I see.
Something appears off with those numbers. It does.
Hear me out before you scream at me like you usually do.......
If 1,768k MT is their 2015 guidance (excluding AA Sur and El Abra), then that implies that 2014 wholly owned production was 1,733k MT.
They did 1,621.7k MT in 2013 from wholly owned mined.
Thru Nov YTD 2014, the did 1,522.7k MT from wholly owned mined.
The 2014 monthly run rate for Codelco-owned operations is as follows:
J - 129.1
F - 115.7
M - 137.9
A - 125.8
M - 142.8
J - 136.3
J - 146.5
A - 156.7
S - 140.1
O - 157.2
N - 134.6
S - O - N avg. = 144
For them to hit 1,733k MT for 2014, then they had to produce an extra 67k MT in the month of Dec. above trend from previous three prior months, (or stated another way, produce at 146% the rate they did in Dec than in the previous three previous months.)
So if they really did hit 1,722k MT for 2014, something magical happened.
To find an extra 67k MT in on month is like finding an extra 804k MT on an annualized basis, and that is a mine the equivalent to Chuqui and El Teniente put together, that appeared out of nowhere.
Who knows, maybe their grade increased at all operations across the board by +46%.....?
However, having a basic understanding of copper porphyry deposits and the general dissemination of target metal within the ore, I would be suspicious about that "possibility". (it's not like their mining veins.)
Something stinks with their numbers from their press release, and doesn't fly with Cochilco data. Not buying it. Sorry.
Codelco also repeatedly said all their 'super-mine projects' would be done by 2018, and it appears than none of them will be.
I don't know...........I like to dig a little deeper than taking Codelco at face value......esp. when I can see Cochilco data with a few keystrokes.
What are your expectations for 2016-2020 for them...?
Sentiment: Strong Buy
Scrap has always been a very important component of China's copper imports. I thought I saw recently that China accounted for the purchase of 64% of the world's copper scrap. But, last year China's imports of scrap was the lowest in 10 yrs. As the price of cu goes down so does the price of scrap which is priced below cu. The available supply of scrap has gotten very tight - hence, China's imports of scrap are dropping.
This should be another signal that China's imports of refined cu will have to rise putting further pressure on any 2015 cu surplus. Hopefully, this will impact cu pricing in the not so distant future.
Yeah mine life are similar.... Red Chris is actually a pretty exciting deposit... They got two or three time the MM mine life.
MM true value is probably in the 1.0 to 1.5B$ range. Valuations are dependent on metal prices though so if you think that copper long term price is 2.50$ and moly is 9$; it's probably worth a lot less than that.
If your average is under 2 you have nothing to worry about, when the wind of change in metal come TC will zoom past 2 in no time. Then When TC go past 5 it will zoom to 10 like a rocket.
I spent some time to review world mine output and compiled what I could get... I came up with ~17,000k Mt of mined output which is reasonably close to trade figures. My estimate of supply growth in 2015 is 830 kT which is well short of the Wood Mack forecast of 1800 kT of supply growth.
Supply growth coming from greenfield is 400 kT (Sentinel 175, Constancia 112, Sierra Gorda 80, Antucoya 40). Brownfield/ramp up/return to normal is 711 kT (Caserones 80, DMH 35, Antapaccay 30, Toromocho 60, Buenavista 120, Morenci 121, Grasberg 135, Katanga 80).
I got 362 T of supply disruption which is mostly made up of Escondida at -150kT and Lumwana at -90kT.
That's pretty much it... I got a lot of +10kT and -5 kT but I won't list them here since it gets way too long. I think I'm probably short on supply disruptions.